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Gambling for charity is a $350 million business in Virginia. A new game could drive that number even higher.

Fair Game


They're not even in Virginia yet. But video pull-tab machines have already caused a legislative brawl and inspired one state senator to call for the abolition of the commission that oversees charitable gambling.

For years, manual pull-tabs, tickets akin to a scratch ticket, have been popular in fraternal organizations. You buy a ticket, pull a tab and see if you've won a cash prize. The video version, made by Cyberdyne Systems Inc., takes that idea and shoves it into the 21st century.

The devices look like Vegas slot machines. For a dollar, a player can hit a bright red button then see numbers roll around. As the numbers are spinning a ticket pops out that indicates a win or a loss. Prizes range from a buck to $1,000.

"The idea is to try to get the gray-hairs out of the [lodge] hall and bring in Generation X," says Stanley Lapekas, executive secretary of the Virginia Charitable Gaming Commission. "They try to get people who have been raised on Nintendo."

Whether that's a good idea or not is a matter of dispute.

Because the video tabs will electronically process their records they will be more accountable than a large box of tickets, Lapekas says. But he says they also have a greater potential to produce gambling addiction. Kids may be particularly attracted to them, he maintains.

Before local fraternal organizations start installing the high-tech devices they will have to get past Virginia laws prohibiting gambling machines in areas where alcohol is served.

But assuming they do — and according to most observers they probably will — the machines can be so profitable that many fraternal groups will find them irresistible. One $5,200 video pull-tab machine can hold 24,000 tickets, which can bring $4,600 in profit. Some of the state's larger lodges could sell that many tickets in a few days. Refilling a machine with another cartridge of 24,000 tickets would cost the organization just $125.

If you think charitable gambling means six little old ladies in a bingo hall, you're years behind the times. Gambling for charity is big business.

In Virginia, lodges and other fraternal organizations bring in $78 million every year from pull-tab gambling. One of the largest in the Richmond area, the Loyal Order of Moose Lodge 1947 in Mechanicsville, pulled in $1.8 million from gambling last year, and posted a gross of $570,340 from manual pull-tabs. Overall, the charitable-gaming industry is a $350 million-a-year business in Virginia.

So when these machines come, who, if anyone, will regulate them? That, surprisingly, is in question.

In the most recent General Assembly session State Sen. Russell Potts, R-Winchester, sponsored SB 1177, a bill that would remove the reporting requirements for pull-tab gaming. That means that none of the money raised through pull-tab sales would be required to go toward charity; this was intended to pull them out of the purview of the Charitable Gaming Commission.

Gov. Jim Gilmore vetoed the bill, arguing among other things that it would remove safeguards against the theft or mismanagement of the funds. The governor also estimated that changing the rules would suck $9 million a year from its " intended charitable purposes."

But the General Assembly overrode Gilmore's veto. In July, when the law goes into effect, charitable gaming organizations will no longer have to report pull-tab profits as part of their gross receipts.

Potts says the change will help bring in more money for charities, which may be true. But he may be more interested in using it as part of his mission to gut the gaming commission.

Potts minces no words when discussing the commission. Potts derides the commission's "tin-badge bureaucrats" who, he says, are interested only in "widening their circle of power." He maintains the commission routinely harasses organizations such as the Moose and Elks Lodges that are engaged in gaming to support charity.

In the commission "you have the most hated organization in the history of Virginia," Potts says. "We don't need a Charitable Gaming Commission. I won't rest until we get rid of them."

Potts would prefer that the regulation of all charitable gambling return to the localities. But, as Lapekas points out, cities and counties have a spotty record of overseeing bingo parlors and pull-tabs.

Most organizations that use gambling to generate charity funds run clean operations. But in the early 1990s a wave of scandals broke over bingo halls and lodges. In Henrico County, among other places, some of the halls engaging in charitable gaming weren't actually giving money to charity. Some people running the games were convicted of embezzlement.

That's when the state stepped in. In 1996 the Charitable Gaming Commission gained the power to regulate the games.

Lapekas, who has run the commission since April 2000, notes that before the commission took over, charitable-gaming groups had to send just 2 percent of profit to charity. Today the organizations send from 5 to 10 percent.

"Prior to creating the Charitable Gaming Commission, no one was watching" the organizations, Lapekas says. "There was a loose tiger out there running around. We grabbed that tiger by the tail and brought it back. Prior to SB 1177," he adds, "I had that tiger sitting right next to me."

As for Potts' claims that the agency is "the fastest-growing state agency in Virginia government," Lapekas points out that prior to the creation of the commission, 88 employees oversaw charitable gaming. Today there are 21.

The big question now is: Will the Charitable Gaming Commission still have regulatory oversight over pull-tab gambling? Lapekas maintains that it does.

Potts, though, is not so sure. "We'll see how it plays out," Potts says. "We may have to get legislation to cut [Lapekas] off at the pass."

Lapekas says Potts' bill will take nonprofits down a dangerous path that could end with the IRS examining their books, or with charges of embezzlement. "I truly believe in the long haul this is going to be detrimental for [fraternal lodges]," Lapekas says. "When there is an investigation it is painful. Then the name of the organization gets tarnished. My goal is to keep people out of trouble."

Before he does, though, he'll have to get past Sen. Potts.

"If Mr. Lapekas wants to line up and play, we'll accommodate him," Potts says. "He better do a better job than he did last

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